Thread: Confirmed with Link: Canucks sign Nicklas Jensen to ELC
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09-23-2011, 02:10 AM
Iceberg Slim
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Originally Posted by metric View Post
IIRC the cap hit can change because of how the bonus breakdown works but I'm not 100%. I'm pretty sure I read that before.
The cap hit certainly can change if the ELC includes a signing bonus and the contract slides for one or more seasons.

A good example of how this works is seen in the Cody Hodgson contract:

Hodgson's deal was an ELC at $2,625,000 over the standard 3 year term. The deal had a 10% signing bonus. The average NHL salary (including signing bonus) was $875,000, with an additional $850,000 in potential performance bonuses (annually).

In the first year, the cap hit was $1,725,000 ($875,000 in NHL salary + $850,000 in performance bonuses). After the contract slid, $87,500 of the signing bonus (that year's portion) came off the books, as far as the cap was concerned. Instead of looking at $1,725,000 for each of three years, that $87,500 comes off the back end of the deal, for cap calculations, meaning the the new cap figure is as follows: ($1,725,000 + $1,725,000 + 1,637,500*) / 3 years = $1,695,833.

*the $1,637,500 here is the initial $1,725,000 minus $87,500 (the "annual portion" of the signing bonus used for salary cap calculations)

So after the deal slid one year, the cap hit went down from $1,725,000 (for 2008-09) to $1,695,833 (2009-10).

Similarly, when the contract slid a second year, another $87,500 of the signing bonus comes off the back end of the cap calculation. This means that the new cap figure looks like this: ($1,725,000 + 1,637,500 + 1,637,500) / 3 years = $1,666,666.

So after two years of contract slide, the cap hit has gone from $1,725,000 (in 2008-09) to $1,695,833 (2009-10) to $1,666,666 (2010-11; and for the remainder of the contract through 2012-13, as it doesn't slide again).

That's why Cody Hodgson's cap hit is now $1,666,666 but it was calculated at $1,725,000 the year his ELC was signed.

If my explanations are a little hard to follow, it might be easier to look at Hodgson's capgeek page to see how this all works:

If Jensen's deal includes a signing bonus, then his initial cap hit will be reduced in a similar fashion for every year his contract slides.

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